Project Management in the Oil and Gas Industry

4 Project Cost Control 
113
4.1 Introduction 
113
4.2 Cost 
Types 
115
4.2.1 Cost 
Estimate 
116
4.2.1.1 Top-Down 
Estimates 
117
4.2.1.2 Bottom-Up 
Estimates 
117
4.2.1.3 Analogous 
Estimates 
117
4.2.1.4 Parametric 
Estimates 
118
4.2.2 Steel Structure Cost Estimate 
122
4.2.3 Detailed 
Cost 
124
4.2.4 Cost Estimate to Project Control 
124
4.3 Economic Analysis to Project Cost 
125
4.3.1 Work Breakdown Structure (WBS) 
125

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x 
Contents 
4.3.2 Organization Breakdown Structure (OBS) 
126
4.3.3 OBS/WBS 
Matrix 
126
4.3.4 Work 
Packages 
127
4.3.5 Cost 
Control 
128
4.3.6 (S) 
Curve 
131
4.3.7 Engineering 
Cost 
Control 
134
4.4 Cash Flow Calculation 
135
4.4.1 Project 
Cash 
Flow 
135
4.4.2 Impact on Increasing Cost 
137
4.4.3 Project 
Late 
Impact 
137
4.4.4 Impact of Operation Efficiency 
138
Quiz 
139
5 Resource 
Hiring 
143
5.1 Introduction 
143
5.2 Project Organization 
144
5.2.1 Types 
of 
Organizations 
144
5.2.1.1 Project Organization as a Part
of the Company 
145
5.2.1.2 Separate 
Project 
Organization 
146
5.2.1.3 Matrix 
Organization 
147
5.2.2 Selecting the Best Organization 
149
5.3 Roles and Responsibilities of the
Project Manager 
151
5.3.1 Project Manager as a Leader 
152
5.4 Administrative Organization for
Total Quality Management 
154
5.5 Team Member Selection 
155
5.6 Managing the Team 
157
5.7 Allocate Resources to Project Plan 
158
5.7.1 Example 
158
5.8 Relation Between Project Parties 
162
5.9 Document and Information Transfer 
162
5.10 Information 
Transfer 
163
5.11 Quality Control in the Design Phase 
164
5.11.1 Inputs and Outputs of the Design Phase 
169
5.11.2 Design Verification 
169
5.11.3 Change in the Design 
169
5.11.4 Approval of the Design 
174
Quiz 177

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 Contents xi
6 Tendering, Bidding, and Contract Traps 
183
6.1 Introduction 
183
6.2 Contracts 
184
6.2.1 Measured Contract 
186
6.2.2 Lump Sum 
186
6.2.3 Cost Plus 
187
6.3 Contract Between the Owner and Engineering Office 
187
6.4 The Importance of Contracts in Assuring the
Quality of the Project 
189
6.5 Contracts in ISO 
190
6.6 FIDIC Contracts 
190
6.7 General Conditions in the Contracts 
197
6.8 Arbitration and the Arbitrator 
198
6.9 Bids and Tenders 
200
6.9.1 Public (Open) Tender 
200
6.9.2 Limited Tender 
202
6.9.3 Negotiated Tender 
203
6.9.4 Direct Order 
203
6.9.5 Tender Technical Evaluation 
204
6.9.6 Commercial Evaluation 
207
6.9.6.1 Commercial Evaluation Methods 
207
6.10 Closeout 
Report 
208
Quiz 210
7 New Approach in Managing Oil and Gas Projects 
215
7.1 Introduction 
215
7.2 Quality System 
216
7.3 ISO 9000 
217
7.4 Quality Management Requirements 
218
7.4.1 Quality Manual 
218
7.4.2 Quality Plan 
219
7.4.3 Quality Control 
219
7.4.3.1 Why is Quality Control Important? 
220
7.4.3.2 Submittal 
Data 
221
7.4.3.3 How to Check Incoming Materials 
222
7.4.3.4 Methods of Laying Out and
Checking Work 
222
7.4.3.5 Material/Equipment Compliance Tests 
224
7.4.3.6 When to Inspect Work 
225
7.4.3.7 Paperwork/Documentation 
226
7.4.3.8 Quality Control Plans 
228

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xii 
Contents
7.4.4 Quality 
Assurance 
229
7.4.4.1 Quality Assurance in the ISO 
231
7.4.4.2 The Responsibility of the Contractor 
(Manufacturer) 232
7.4.4.3 Responsibility of the Owner 
233
7.5 Project Quality Control in Various Stages 
234
7.5.1 Feasibility Study Stage 
234
7.5.2 Feed (Preliminary) Engineering 
235
7.5.3 Detailed Engineering Study 
238
7.5.3.1 Design Quality Control 
239
7.5.4 Execution 
Phase 
240
7.5.4.1 ISO and Control Work 
242
7.5.4.2 Inspection 
Procedures 
242
7.5.4.3 Importance of Contracts in
Assuring the Project Quality 
243
7.5.4.4 Checklists 
243
7.6 Operational Phase of the Project 
249
7.7 Total Building Commissioning System 
250
7.7.1 Planning 
Stage 
252
7.7.1.1 Identify Commissioning Team 
252
7.7.1.2 Define Owner’s Project Requirements
with the Customer Agency 
258
7.7.1.3
Develop 
Preliminary 
Commissioning Plan 
258
7.7.1.4 Commissioning for Certifications
(LEED, Energy Star, etc.) 
258
7.7.1.5 Commissioning Agent Costs 
261
7.7.1.6 Cost-Benefit Analysis for
Commissioning 262
7.7.2 Design 
Stage 
262
7.7.2.1 Incorporate Commissioning into
A/E and CM Scope of Services 
262
7.7.3 Construction 
Stage 
272
7.7.3.1 Review Submittals for
Performance Parameters 
272
7.7.3.2 Develop and Utilize Construction
Checklists 273
7.7.3.3 Oversee and Document Functional 
Performance Testing 
274
7.7.3.4 Test Data Records 
274
7.7.3.5 Hold Commissioning Team Meetings
and Report Progress 
275

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Contents xiii
7.7.3.6 Conduct Owner Training 
276
7.7.3.7 Turnover Commissioning Record 
277
7.7.4 Building Commissioning Process
Post-Construction Stage 
279
7.7.4.1 Post-Construction 
Stage 
279
7.7.4.2 Perform Deferred and Seasonal Testing 279
7.7.4.3
Re-inspect/Review 
Performance 
Before End of Warranty Period 
280
7.7.4.4 Complete Final Commissioning Report 280
7.7.4.5 Recommission Facility Every 3–5 Years 282
7.7.4.6 Recommissioning 
282
7.7.5 Advantages for Total Building
Commissioning System 
283
Quiz 
284